Enter the sponsor’s overhead rate and the direct costs into the calculator to determine the indirect costs.
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Indirect Costs Formula
The following formula is used to calculate the indirect costs of a budget preparation
IC = SOR/100 * DC
- Where IC is the indirect costs ($)
- SOR is the sponsors’ overhead rate (%)
- DC is the direct cost base ($)
To calculate the indirect costs, multiply the overhead rate by the direct cost.
Indirect Costs Definition
Indirect costs are defined as project-related costs that cannot easily be identified for a particular project. In other words, these are the overhead costs of a project.
How to calculate indirect costs?
Example Problem #1:
First, determine the sponsor’s overhead rate. In this example, the sponsor is charging an overhead rate of 50%.
Next, determine the direct cost base. The direct cost base of this planned project is budgeted to be $100,000.00.
Finally, calculate the indirect costs using the formula above:
IC = SOR/100 * DC
= 50/100 * $100,000.00
= $50,000.00.
Example Problem #2:
In this next example, the sponsor’s overhead rate is much higher, at 87% of direct costs.
The direct costs of this project are also higher at $200,000.00.
Using the formula as we did above, the indirect costs are calculated as :
IC = SOR/100 * DC
= 87/100*200,000
= $174,000.00.
